In a recent whitepaper sponsored by Tompkins (supply chain consulting firm) and MonarchFx (logistics consulting firm), James A. Tompkins, Ph.D. addresses what he terms “The New Era of Retail” and some “truths” that he feels retailers should understand. The impetus for the article— Food Fight: Discovering Eight Truths of the New Era of Retail— is the recent Amazon acquisition of Whole Foods and the remarkable amount of conjecture as to how that will affect the grocery industry. Dr. Tompkins begins with this interesting observation: “Over the past 20 years, many retailers have had the dream of entering the food retail business. The appeal is undeniable: huge revenues, repeat business, and in-store traffic. The fascination has resulted in a proliferation of food retail models ranging from dollar stores, off-price stores, convenience stores, drug stores, supermarkets, discount supermarkets, premium supermarkets, farmers markets, restaurants, online retailers, specialty/natural food stores, supercenters, and warehouse clubs. The appeal and fascination fades when the reality of low margins, a shameful amount of waste, and slow sales growth all set in. Even of greater concern is the lack of consumer loyalty in that every month 68% of Americans shop at five or more types of food retailers. In addition, the low margin struggles are getting worse…”
MERCHANDISING TIP OF THE WEEK. Dr. Tompkins outlines his “Eight Truths” and I have chosen to briefly share four of those with you today. The first—Retail is broken and major disruptions are to be expected - was addressed in the introductory quote I included above. As Joe Caito has frequently said, “our cities, communities and our nation is really over-retailed” and Dr. Tompkins’ listing of businesses selling food illustrates that sentiment. Drive down any street and count the number of business selling food, whether full meals, ingredients or simply snacks. To succeed, a “disruption” will have to occur.
Success going forward in retail will require hustle and grit. Dr. Tomkins explains: “The leadership characteristics that will impact the success of food and non-food retailers going forward are no different from the characteristics of great retail leaders of the past and present. There are many historical leaders we can study to learn about their leadership characteristics; I selected the most innovative retail leader of all time, Sam Walton, and brilliant executives from our present day, Jeff Bezos (Amazon.com) and Jack Ma (Alibaba Group). After considerable study, I have decided the two leadership characteristics that all three of these dynamic, wildly successful executives share are hustle and grit To “hustle” today is to have a strategy for benefitting from a fast-moving and uncertain world, to have the skills, focus, speed and commitment to success, independent of challenges faced. And, to be bold and not avoid risk, but to manage risk. “Grit” is passion and perseverance for long-term goals, and the stamina to remain unshaken in pursuit of objectives. ‘Grit’ is also stamina in the face of adversity and holding steadfast to goals even when there are bumps in the road. My wish for you is that you move forward with hustle and grit.”
Unique is exciting and marvelous, common is dull and unpleasant. Dr. Tompkins speaks of the shopping experience: “Grocery is a highly emotional shopping experience for many. There is a dichotomy of the connectivity to grocery shopping for the shopper.” The next part of Tompkin’s quote is incredibly important as you plan your specific approach in the New Era of Retail: “On the one hand grocery shopping is gathering stuff that is needed to keep the household going. No emotional connection there. On the other hand is the role of the grocery shopper providing for the health and pleasure of themselves and loved ones.”
Dr. Tomkins goes on to illustrate this difference with an interesting lesson that played out for Campbell Soup in China. “China families have traditionally eaten a lot of soup. Several years ago, Campbell Soup studied the market and created unique soup products that were healthy, convenient, and economical. Their soup was a failure. The thing they (Campbell Soup) missed was ‘It was not about the soup.’ It was about the dedication of the person responsible for the cooking and the health and happiness of the family. The making of the broth, the selecting and preparing the vegetables, and the stirring and simmering of the soup to serve it at the peak of its healthiness and (flavor) was a very emotional undertaking. The Chinese cook was furious that some company was trying to replace their role of cooking the family’s meal by opening a can and placing it on the stove. In many ways today, the thumping of the fruit, the selection of the lettuce, tomatoes and meat, and getting just the right bottle of wine is the experiential joy today of caring for oneself and one’s family.”
Dr. Tompkins share this interesting conclusion: “The fact is, customers do not want to handle Pantry Restock (non-perishable foods, beverages, household items, etc.). They are happy to drive up to curbside pickup for these items, or have them delivered to their homes. Customers want to go to a grocery store that is efficient, clean, and convenient to do their grocery shopping for Fresh and Unique items. Customers want to enjoy the experience and fun of food retail and to avoid the dull routine of shopping.”
Do not be afraid to kill sacred cows. Dr. Tompkins shares one “sacred cow” that needs immediate change: “When I was young we had one package size of one type of Oreo cookies. This has exploded and today there are hundreds of different types/packages of Oreos. What should a retailer do? Retailers decided to sell their shelf space to the manufacturer. If Nabisco spent enough money on shelf allowances for Oreos in a supercenter, they could have 50 feet of shelving, four feet high, full of Oreos. The result is a lot of inventory in the store that is slow moving and not producing the margin per square foot of shelf space the store desires.” As we examine our produce department offerings, there may be similar sections that do not produce the margins we need to succeed. As Dr. Tompkins points out, there is a New Era of Retail, and we need to react with creativity, courage and conviction. Happy Selling!